British Petroleum and Tesco Swot Analysis Essay - Essay Prowess

British Petroleum and Tesco Swot Analysis Essay

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Executive Summary

This paper analyses the different types of organisations, including sole proprietorships, partnerships, limited liability companies, and non-profit organisations. Organisations operate and function well when organized individuals lead them. Therefore, the report below looks into the different organisational structures in businesses that can bring out the best in an organisation and enable them to reach their objectivesPestle and SWOT analysis are conducted to show how organisations are affected by the internal and external environment. The SWOT analysis is also crucial to the decision-making process of various stakeholders in an organisation. Therefore, the report aims to indicate the effects of environmental factors on organisational objectives using various examples.

1.    Introduction

  1. A business is an organisation or entity that uses economic resources to provide goods and services to customers in exchange for money or other goods and services.
  2. Such entities can be categorised into sole proprietorships, partnerships, corporations, or limited liability companies, LLCs. These organisations are of different sizes and have different structures on how they are managed (Mollerr et al., 2005).

2.    Different Types, Size and Scope of Organisations

Sole Trader

Sole traders are the most common and simplest forms of business organisations. In this setup, a person or individual fully owns the business (Sansoni 2013). It is simple to set up; hence it provides the least amount of legal and financial protection for the owner. The business does not have a separate legal identity from the owner; therefore, the owner and business are considered a single entity. This also means that the owner is fully liable for any liabilities incurred by the business. The business owner is allowed to set it up under his name or use a fictitious name to acquire the local licenses required to run the business. This type of business is easy to set up and run because of its small size. The greatest drawback to a sole proprietorship comes about when the business has incurred debts; this puts the owner’s assets on sale or auction to recover the debts.

Partnership

A partnership is a form of business created when two or more people engage in business activity to profit. A partnership offers its owners flexibility and simplicity of operation of the organisation. A partnership agreement is signed during the partnership’s formation to govern how it is run and help solve future disputes that may arise during the business. Partners in a partnership are responsible for the liabilities of their firm. Partnerships can be categorised into general partnerships, limited partnerships, or limited liability partnerships. There is unlimited liability for each person in general partnerships, meaning that should the partnership fall into any form of liability, the partners’ assets can be used to cover the liability. (Keegan & Francis, 2010).

This means that each partner is responsible for the actions of the other. Therefore, the day to day operations of the organisation is of mutual responsibility. There is at least one general partner who oversees the day-to-day operations of the organisation in limited partnerships. However, they do not take part in any decision making and do not have any direct control over the business. (Ojasalo, 2001). Advantages of partnerships are; there is profit sharing; therefore, gains are equally distributed. The organisation is also easy since skills and knowledge are combined. Partnerships are also easy to form because only a few costs are incurred. Disadvantages include challenges in sustaining some relationships. Once disagreements arise, the partnership may be dissolved.

Limited Companies

 Limited liability companies can be categorised into Public Limited Companies or Private Limited Companies

Private Limited Company

A company under the limited liability status is separated from its owners, meaning that it exists on its own as a legal entity. This separates the owners from any liability the company incurs. Ownership of limited liability companies is not restricted, and therefore individuals, corporations, foreigners, and other limited liability companies can be owners of such setups. Private liability companies allow for up to fifty shareholders who are deemed as the owners of the companies. Owners of Private limited companies are generally known as members. The setup of a limited liability company involves choosing a unique name, signing of articles of organisation with the state, and final registration of the company.

Under this document, the company’s initial finances, structure, and organisation are outlined. A Private limited company is easy to form with minimum complexities in paperwork and costs. They also provide freedom in management as there is no requirement to have a board of directors, annual general meetings, or maintain strict record keeping. Advantages of Private Limited Companies offer flexibility when it comes to investing and profit-sharing, depending on the members’ initial agreement. It is also possible for an outside investor to input their investment without necessarily being owners (Axelsson and Johansson, 1992). The net income of the company is, therefore, also taxable. The directors are able to set a monthly or yearly based salary and be able to withdraw additional finances in the form of Dividends.

An example of Private Limited Company is the British suit making company Hawes & Curtis Limited.

Public Limited Company

Public Limited Company (PLC) is a type of business that functions as an independent organisation but is legally separated from its owners. It is owned by individuals who manage the business. It is created when a group of shareholders, otherwise known as owners, is represented by holding common stock to pursue a common goal. It is governed by Board of Directors. Public Limited companies differ from Private limited companies by the fact that they allow members of the public to be shareholders; hence they own part of the company.  An example of a corporation is BP (British Petroleum Company PLC) and Tesco PLC.  An advantage associated with Public companies is that an owner can only lose what he or she has invested; therefore, other shareholders are not exposed to the same risk. A PLC can also sustain itself for a lifetime as long as the articles of incorporation remain unchanged. Disadvantages include extra expenses on taxation requirements as well as the setting up costs.

Non-profit organisations

Non-profit organisations are those that are formed to help society rather than make a profit solely. An example of such is a charity like Red Cross. A charity could raise money through fundraisers and campaigns to help victims of disasters such as war, floods, famine, bettering the environment, or public recreation facilities such as parks. The money raised by these organisations is tax-free. An advantage of non-profits is that there is a guarantee of commitment from employees. A disadvantage is that there are often challenges with funding since they depend on other people’s goodwill.

3.    Organisations Scope and Objectives

Organisations may be also categorized by the industry they operate in.

  1. Primary Sector – Radetzki, M., & Wårell, L.                                                                                                                                                                                                                                                                                                                                                                 (2020) explained that the primary sector deals with raw materials extracted from the nature. Mining and Farming are examples for such business.
  2. Secondary Sector – In this sector the companies are concerned with the manufacturing process. They take products from companies from primary sector and produce output. For example using trees to make number of tables or desks. Car manufactures falls into this sector (Dafermos, 2015).
  3. Tertiary Sector – in this sector the organisation is providing services rather than product. IT companies are typical example of this according to Whatman, Potter & Boyd, (2011).

In many cases one organisation may include two or three of the sectors. For example a fast food restaurant that produce its own meet. It involved farming(primary) Packaging meats and selling it(secondary) and offer physical place where the customer receive service along with the food products.

4.    Analysis of Organisational Structures

The size of an organisation and the number of functions within the organisation influence the structure the organisation takes. The structure is then responsible for how the different functions relate to one another. It also defines the various roles and responsibilities of various functions and those of players in each function and the authority they report. An organisation without a defined structure consequently suffers poor coordination of functions and slow decision making (Ford et al., 2003).

Functional

The functional organisational structure is about dividing a firm in accordance to various unique tasks where each has a department. Each department has a director or manager who is supposed to be answerable to the top management. Consequently, these departmental managers have to make informed decisions that enhance the performance and motivation of their employees.  According to Kotler (2003), some of the roles could be public relations, IT, and marketing. In each functional department, the employees or members have skills which are specialised according to the roles that they are supposed to perform. Functional structures are common in most SME’s as well as some large organisations. Nonetheless, many large firms opt to combine numerous organisational structures. Most corporations employ functional structures whereby the roles of each member up the hierarchy are clearly defined. This promotes smooth operations within the organisation. The most senior position in most corporations is chief executive officers, followed by different managers of different departments in the organisation (Palmer and Hartley, 2009). Below is an example of an organisational structure.

Chief Executive Officer
Head of Technical Services
Chief Financial Officer
Human Resource Manager
Chief Administrative Officer
Senior Finance Manager
Senior Manager
Assistant Human Resource Manager
Assistant Administrative Officer
Accountants
Project Managers
Staff
Staff
Staff
Staff
Finance Team
Technical and IT Team
Human Resource Team
Administrative Team

Divisional Organisational Structure 

A divisional organisational structure is used by large organisations with different brands or smaller organisations (Gurianova & Mechtcheriakova 2015). This structure gives the business the ability to separate large corporate sections into semi-autonomous groups. The smaller groups operate as a single business in their respective location. An example of the divisional structure in London is McDonald’s. The company is divided into smaller organisations that are distributed across different locations in the UK. Each hotel is answerable and responsible for every decision they make. The different McDonald’s divisions have their own development staff, sales, production, clerical, advertising, and accounting departments, which are independent. The divisional structure is essential for easing task levels of management.

Flat Organisational Structure 

A flat organisational structure has few or no management levels between the staff and the management. Therefore, this structure’s management levels entitle the employees to a certain degree of leadership (Jones, 2013). The staffs have certain responsibilities which they are given depending on theory expertise levels. Therefore, they are allowed to become more involved in the business proceedings and decision-making process.

Matrix Organisational Structure 

Galbraith, (2014) explained that a matrix organisational structure is set up in a way where the reporting relationships are expressed as a matrix or a grid rather than the traditional hierarchy. Therefore, the workers have dual reporting where they report to a product manager and a functional manager.

Organisational Structure in BP

BP is an organisation that deals with oil and gas production, and it is present in more than 70 countries. Upstream and downstream functions separate the organisation’s activities. BP’s executive team has nine members, including the upstream and downstream executives, the CEO, and the CFO. The structure then branches into regions (The Official Board 2020). The divisions in BP are specialized based on their functions in oil and gas production. These functions include research, exploration, and transportation of oil and gas. BP’s leadership is highly centralized, and the need for fast and effective decision making makes the sub-units to complement the whole company’s organisational structure (The Official Board 2020).

Figure 1 BP’s Matrix Structure Source: (“The Official Board. (2020)

The Relationship between Different Organisational Functions and How They Link To Organisational Objectives and Structure

Different organisations employ different structures that are used to make success the overall objective of the organisation and the daily operations of the entity (Christensen and Raynor, 2003). These structures outline how different functions in the organisation are interconnected. The various functions include Human Resource management, Accounting and Finance, IT, Marketing, and Operations. According to Tran and Tian, (2013) the types and number of functions are dependent on the objectives, size as well as the industry sector that a firm operates.

Each function support the organisation in a different way. However, when combine together, they are vital for the existence of the organisation. For example a Human Resource department ensure that the organisation employs right candidates for the positions within Marketing or Finance. From the other side the IT department make use of technologies to provide data to the human resource about employee’s performance. Also the Finance department set budgets for marketing campaigns and production. Marketing and sales are important for the company to have smooth operational process. So the interrelation of these functions is significant to the success of the organisation to (Tran and Tian, 2013).

PART 2

Identify the Positive and Negative Impacts the Macro Environment Has Upon Business Operations, Supported By Specific Examples

A business environment is a sum of all internal and external factors that affect a business or organisation either directly or indirectly in achieving its goals and overall functions (Palmer & Hartley, 2011).

The Internal factors are associated with the organisational strengths and weakness, plus the possible opportunities and threats. These are accessed with the use of SWOT analysis. From the other side external factors such as Political, Economic, Social, Technological, Legal or Environmental factors are accessed with the use of PESTLE analysis (Gupta, 2013).

Positive and Negative Impacts of the Macro Environment

Political

Worthington and Britton (2014), explain that the political environment is generally entered on the exercise of power and authority by local and international authorities. Such include government policies on taxation of goods and imposition of tariffs. For example the upcoming BREXIT deal will affect many UK based business or those foreign companies which deal with UK business.

Economic

The economic environment comprises all economic factors that have affect the functioning of the business. These factors include demand and supply, money and banking, inflation and economic growth and development.

Social

The social, cultural and demographic environment comprises factors that deal with the daily lives of people, their age, gender, social class, population, lifestyle, population and population growth rate, levels of education and the overall attitude of people towards some things (Adler & Gunderson, 2008).

Technological

The technological environment comprises factors that relate to the existence of technology, its availability and development, that is, the application of knowledge to make or improve products and services. In today’s business this is one of the major influencers on the business. Big organisations invest a lot of finances in this.

Legal

The legal environment deals with matters concerning laws that govern how organisations carry out business operations. Such legislations include organisational laws, securities laws, consumer protection laws and contract laws.

Environmental

Environmental factors comprise those that affect the immediate physical surrounding of an establishment. Such factors include climate change, environmental degradation or pollution, planting trees and resettling of the human population displaced by the creation of the establishment among others (Cadle et al., 2010).

PESTLE Analysis on BP

British Petroleum (BP) PLC is one of the world’s largest oil and Gas Company whose headquarters are in London in the United Kingdom. The Company operates in about 80 countries and produces 3.8 million barrels of oil daily. It also runs close to 22,500 service stations in the world. The PESTLE analysis (political, economic, social, technology, legal and environmental analysis) examines the external factors of a company; how they affect the performance of the Company and provide an insight of dealing with such factors.

Political

BP has faced several political issues in its operation. One of the major contributing factors to this is the environmental crisis history (Loven, 2010). As a result of this, the Company has in the recent past faced lawsuits which have led to damages and losses of more than 2.5 billion. On the other side, however through, political interventions, the Company can experience better profit margins. A major achievement in this regard was the establishment of the National Commission on the BP Deepwater Horizon Oil spill and Offshore Drilling in May 2010.

Economic

Another external factor that BP has dealt with is the economic factor. The Company has had to deal with damages that amounted to $35-45 million. This was brought about by a near-miss accident in Hull at BP’s chemical plant. The 2017 economic analysis of the BP Company states that there is a high demand for oil and petroleum and so the Company prides itself in the effective delivery of products in the market. Marketing strategies have been extensively employed to grow downstream projects further. Likewise, upstream projects have witnessed a rise in production (BP, 2017).

Social

The success of the Company depends on the influence and power it has towards society (BP, 2017). The rise in prices of local oil and gas has affected the Company. As a result, social factors such as the provision of employment opportunities, workforce welfare and security as well as human rights have been major challenges that the BP Company has faced. On the other hand, there can be benefits that can be found in these challenges are addressed. If there is proper income distribution, then the oil demand will increase because there will be more middle-class individuals who will use more energy when, for instance, they buy a car. Another example is the effect of Covid-19 and how that, affect the prices of the oil. All Oil companies suffered from the drop of the prices during lockdown.

Technological

Technological advancements majorly contribute to alternative ways of energy integration within markets. According to extensive research, it is proven that that proper technological integration will make a big difference between competing firms. Initially, the Company faced technological challenges since they had not transitioned to embrace new advancements. As a result of increasing competition BP has had to invest in the technology for oil and gas production through improving sub-sea oil technology. As of 2016, British Petroleum made an investment of $400 million to make an extensive research and development.

Legal

Different rules and regulations as well as laws are highly influential for the oil companies. BP is also affected by the Local Transport Act (2008), which influences road pricing. According to The Associated Press, 2013, there is a negative impact on the firm’s financial performance. This is attributed to accountability concerns as well as lawsuits towards the Company.

Environmental

Environmental factors are also among the major challenges facing the BP oil company. The numerous oil spills have also cast shadows of doubt on BP’s performance. Changes in climatic conditions like global warming and instability of weather patterns are likely to affect oil production. The positive side of this is that the Company has maintained infrastructure, thus avoiding further damage in the oil wells and pipelines. The usage of nuclear power was introduced and is continuously promoted by BP to reduce greenhouse emissions by about 40%.

The price of oil is, to a large extent, affected by the 1993 Taxation and Fuel duty. Furthermore, the 2005 act of Renewable Transport Fuel Obligation crusades for the exclusive use of biofuels by consumers. These fuels negatively affect sales in the oil industry.

Identifying Strengths and Weaknesses through an Internal and External Analysis

A SWOT analysis is a study carried out by a company to assess its strengths, weaknesses, opportunities and weaknesses. The primary objective of a SWOT analysis is to help organisations develop a full awareness of all the factors involved in making a business decision. To run a successful business, you should regularly analyse your processes to ensure you are operating as efficiently as possible (Mullins, 2007). While there are numerous ways to assess your company, one of the most effective methods is to conduct a SWOT analysis.

SWOT ANALYSIS AT TESCO PLC

TESCO PLC is a company based in the United Kingdom with branches all over the world. TESCO conducts a SWOT analysis to help in making major decisions affecting the company.

Strengths

TESCO has established network of warehouses and retail stores which makes shopping convenient for customers as well as taking market shares from competitors. This helps in reaching out to its huge customer base. Their distribution network is also better than that of many other retailers, and this ultimately ensures that their products sell on time. TESCO also has considerable brand equity in its name with global recognition and respect for what it stands for with regards to quality, selection and service. Through the use of technology, TESCO has created greater cost efficiency and enhanced service delivery as well as improved customer relations.

Weaknesses

TESCO, like any other organisation, has number of weaknesses. Competitive pressure over the years has led to losses in areas where it should have made profits. The company has also focused majorly on European markets and has not spent the time or resources to develop other markets where it operates. This has led to inability to progress in more European countries for example. TESCO has also faced several issues based on quality control of products, thereby lowering its customer base.

Opportunities

During the COVID-19 pandemic, many supermarket businesses have experienced losses due to lower purchases. This is due to the limitations of movement to these establishments. However, the challenge can be addressed by the establishment of online stores, one of which TESCO should develop to reach out to customers. TESCO should also apply the cash-and-carry model of business where all credit transactions are excluded and up-front payments for goods and services required. By implementing such a model, TESCO would be able to increase sales, reduce the cost of the physical store and in the long run, strengthen its financial position (Allen, 2020).

Threats

 According to Ernst and Young, 2010, there are several risks that any organisation may face. Similarly, there are several threats to TESCO, as any other company would face. BREXIT is a major threat to an international firm such as TESCO. Its European supply chain, revenue and income will be highly affected once Britain leaves the European Union. This will leave the firm exposed to tariffs and other trade barriers that may increase cost for the company. There will also be delays in delivery culminating from strict inspections. Other European brands such as Lidl and Aldi become more and more powerfull on the UK market and that threaten the position of Tesco in a long run.

Finally the economic implication of Covid-19 are not yet clear, but they may be very negative and so may affect the purchasing ability of the customers.

Impacts That both Macro and Micro Factors Have Upon Business Objectives and Decision Making

As opposed to the macro-environment, the microenvironment comprises of internal factors that affect a business. These factors include suppliers, customers, competitors and the general public. If they hold power, suppliers can influence decisions made by businesses. Customers are key players in any business. The types of customers affect everything. For instance, marketing strategies have to go hand in hand with the targeted customers. Competitors also need to be considered when making decisions, especially if the business plan to offer the best prices on the market (Johnson et al., 2013). Another factor is the general public and how the operations of a business affect it. Macro factors also affect decision making and the objectives of a business (Thomas, 2007.

Conclusion

In conclusion, there are different types of businesses that are in existence. These businesses each have their forms of ownership as well as their own legal identities. It has also been noted that each of these businesses has its advantages and downsides regarding their structures and ownership. Therefore, the decisions is based on the nature of the business and the idea of the entrepreneur on which type of business to set up depending on the advantages and disadvantages outlined and structures that work well with their business.  Furthermore the success of the business is a result of being aware of the environment that affect the business. Regular and timely analysis with regards to PESTLE and SWOT will benefit a business since it will be in a position to effectively understand its current situation and adopt strategies that will enable it grow and develop.

References

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